How to find out if your superannuation fund is underperforming

SuperannuationWealth Management

18 November 2021

You may have seen or heard a lot about underperforming superannuation funds in the media lately, and it may have prompted you to look at your own fund. So, what’s it all about?

YourSuper reforms came into effect on 1 July 2021 which mean APRA now monitor all MySuper funds in conjunction with the ATO’s YourSuper comparison tool.

The YourSuper tool is designed to provide consumers with transparent information on their fund’s fees and performance for MySuper options. It compares fees and performance over a seven-year period so consumers can see how their fund performs over the long-term. Remember, just because a fund performs well one year doesn’t necessarily mean that it will perform well over the long term. The same can also be said if the fund does not perform as well in one year.

Whilst retirement may seem like a long way off, it is important to pay attention to your superannuation as it could mean that your superannuation balance is significantly higher at retirement allowing you to have a more comfortable retirement.

What’s MySuper?

MySuper products were designed to be a simple, low cost, balanced product for people that haven’t made a super fund choice, allowing them to easily compare super funds. You may have joined a fund that your employer offers and didn’t make an investment choice, therefore you would find yourself in a MySuper option.

Approximately 66 percent of funds in MySuper products are invested in a balanced option which generally has 70 percent exposure to higher risk growth assets, such as shares and property and 30 percent in lower risk defensive assets, such as cash and fixed interest[1]. The other 34 percent of MySuper funds are invested in life stage approaches where there is higher growth for those under 45 with the fund gradually becoming more defensive as you get closer to retirement age.

Is a MySuper fund the best superannuation for me?

To see where your fund sits in the ratings, review your current superannuation using the Your Super comparison tool. Each super fund should offer a number of investment options that you may wish to consider if you aren’t happy with the current performance.

A major consideration when choosing your investment options is to consider the level of risk you are willing to take to meet your income needs in retirement. Sitting down with a Financial Adviser to discuss your retirement income needs and attitude to risk can significantly benefit you as they will go through a detailed risk profiling process to determine the appropriate asset allocation to assist you in achieving a super balance that will help meet your lifestyle needs in retirement.

In addition to this, your adviser will spend time understanding you, your goals and your plans for the future all of which may affect the level of risk you are prepared to take with your superannuation investments.

What about my insurance in superannuation?

Insurance may be included in your super so you need to consider this before you consolidate or switch super funds, as any insurance in your fund will be cancelled. This becomes especially important if you have any pre-existing health conditions, debt, children etc and you should seek advice before making any changes.

Regardless if you are in a MySuper product or not, taking ownership of your super is important because:

  • If you are an employee, 10% of your income is contributed by your employer as super guarantee.

  • It is generally the largest asset after the family home.

  • It can provide you with a tax-free income stream in retirement.

Whilst retirement may seem like a long way off, it is important to pay attention to your superannuation and make small changes now.

A 40-year-old earning $85,000 annually, who has $100,000 in super earning five percent each year, should have approximately $322,326 by retirement at age 67. However, if the fund returned six percent per annum they may end up with $378,614 over the same timeframe. In this simple example this is a difference of $56,288.

If you would like to review your superannuation to ensure that you are on the right track to meet your retirement income goals submit this form to receive a call back from the Findex Wealth Management team or search for an adviser in your area.

[1] https://www.superguide.com.au/comparing-super-funds/mysuper-funds

The information in this article is of a general nature only and does not take into account your objectives, financial situation or needs. Past performance is not an indication of future performance. You should consider whether the information is suitable for you. Before you make any decisions in relation to a financial product, you should read the relevant Product Disclosure Statement (PDS), Information statement or Target Market Determination (TMD) and seek personal financial advice. For a full copy of our disclaimer please refer to the Disclaimer and Disclosure link in the section below.

Author: Sean Farrelly

Sean has over 15 years’ experience in the financial services industry where he has gained experience in a variety of roles including client services, paraplanning, mortgage broking, and financial planning with the majority of his time spent advising direct to clients. This experience has provided Sean with a high level of technical and strategic knowledge that he uses to assist his clients in achieving their personal and financial goals. Sean likes to spend time outdoors playing sport and exercising with his family and friends.